Mergers and acquisitions are heating up, particularly in the accounting sector, buyers and sellers alike face a common challenge: understanding the true value of a business. Jonathan Dickens, Group Partner at SMH, has a bold question for business owners who are looking to sell:
“Knowing what you know about your business, would you buy it at the price you’re asking?”
This powerful question cuts to the heart of why many sellers overestimate their firm’s worth, ultimately jeopardising the very deals they hope to secure.
Having led over ten acquisitions for SMH Group, Jonathan has seen his fair share of both successful and stalled transactions. Here, we explore his top insights on why sellers need to take a hard look at their expectations—and how approaching the sale with transparency and realistic goals can lead to better outcomes for everyone involved.
Curious to dive deeper into Jonathon’s expert advice on selling your business? Want to uncover the secrets to avoiding common pitfalls and maximising your firm’s value? Watch the full
M&A Diaries
episode now—
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The reality check: Why most sellers overvalue their business
For many sellers, their business is more than just numbers on a spreadsheet; it represents years of hard work, relationships, and dedication. As a result, they often value their business based on an emotional attachment rather than concrete financials. Jonathan has observed that some sellers hold firm to inflated prices due to advice from well-meaning colleagues or industry trends, without acknowledging the unique financial landscape of their own firm.
Jonathan’s question, “Would you buy your own business?” highlights the importance of objectivity in the valuation process. When sellers put themselves in a buyer’s shoes, they’re better equipped to see the strengths and weaknesses of their business, allowing for a more grounded price expectation that can drive productive negotiations.
Avoiding red flags: The importance of realistic expectations
According to Jonathan, certain behaviours from sellers can turn off prospective buyers quickly. Here are three common red flags that buyers like Jonathan look out for:
• Inconsistent communication – Slow response times can signal a chaotic operation, which raises questions about the business’s internal organisation. “If you’re firing emails off to the seller and they’re not replying for two weeks, it gives you an idea of the kind of business they’re running,” Jonathan says.
• Moving goalposts – Sellers who change terms after initial agreements create uncertainty. Jonathan emphasises the importance of clarity: “If we’ve agreed on something, don’t come back weeks later wanting to renegotiate the terms. It signals potential challenges down the road.”
• Resistance to change – For an acquisition to be successful, Jonathan and his team need to implement processes and improvements. Sellers who resist these changes can make integration difficult. For Jonathan, one of the biggest frustrations is working with a seller who struggles to “let go” of control after the sale.
For sellers, staying transparent, responsive, and committed to agreed-upon terms can build buyer confidence and smooth the transaction process.
Transparency is key: The value of full disclosure
Jonathan’s question,
“Would you buy this business?”
also applies to transparency. As a buyer, Jonathan needs complete visibility into the business he’s purchasing, from recent financials to client data to employment contracts. Without access to this information, buyers are left in the dark, which can lead to missed opportunities or a devaluation of the business.
Jonathan advises sellers to keep their data updated and ready, not only to impress buyers but also to create a smoother negotiation process. He also finds that honest sellers who reveal potential issues upfront foster trust. “If you’re transparent from the start, even if there are challenges, we can work through them together,” Jonathan explains.
Emotional readiness: Are you ready to let go?
For many sellers, the thought of relinquishing control can be overwhelming. Jonathan’s advice? Make sure you’re truly ready to move on before entering the negotiation process. Sellers who aren’t emotionally prepared to step back from ownership often face post-acquisition challenges, especially if they stay on in a reduced role.
According to Jonathan, sellers must adjust to the reality of their new role within the firm, which could mean logging holiday time, seeking approval for decisions, or taking direction from a new team. “If you’re not ready to let go, the sale will feel like a loss of freedom,” he explains. Sellers who find comfort in these new dynamics, however, often experience a smoother transition and a more fulfilling experience after the sale.
Price vs. value: Understanding what buyers really want
One of Jonathan’s strongest pieces of advice for sellers is to think beyond one-time revenue multiples. Many sellers come to the table with expectations of a 1.2x revenue valuation, but Jonathan cautions that this doesn’t hold if a business is unprofitable or requires significant improvements. “Would you buy this business for a 5% return on investment or a 10%? If the answer is no, then you may be asking too much,” Jonathan says.
Buyers like Jonathan prioritise firms with solid profitability, loyal client bases, and growth potential. By valuing their firm based on market data and profitability rather than arbitrary benchmarks, sellers can set a fair price that makes the business attractive to buyers and is more likely to yield a successful sale.
Selling smart: A win-win through realistic valuation
Jonathan’s insights for sellers highlight the importance of approaching the M&A process with transparency, flexibility, and realistic expectations.
Here are his final pieces of advice for sellers who want to set themselves up for success:
• Be communicative and consistent – Regular communication signals stability and helps buyers feel confident in the acquisition.
• Be transparent about your business’s strengths and weaknesses – Disclosing challenges upfront builds trust and allows buyers to make informed decisions.
• Ask yourself: Would I buy this business at this price? – By taking an objective look at your business, you can ensure your valuation aligns with market realities.
It’s easy to get swept up in lofty valuations and idealistic expectations. But Jonathan’s perspective reminds sellers of the power of a grounded approach. When sellers bring honesty and pragmatism to the table, they set the stage for a transaction that benefits everyone involved—allowing them to move on to their next chapter with confidence and peace of mind.
